Quebec turns to Alberta for guidance in developing a massive tract of resource-rich land in its north – by Marzena Czarnecka (Alberta Venture Magazine – May 22, 2012)

http://albertaventure.com/

Erik Richer La Flèche … believes successful implementation of Plan Nord has
the potential to transform Quebec into a “mini-Australia, that is, a preferred,
stable supplier to some of the largest economies in the world.”

What can Quebec learn from Alberta’s experience, and what might it mean for this province’s future?

May 2012 marks the one-year anniversary of the launch of Quebec’s Plan Nord by Premier Jean Charest. It’s a 25-year, $80-billion economic, social and environmental development strategy for Quebec’s massive northern territory.

Sound familiar? The parallels between Plan Nord and Alberta’s oil sands occurred to Robert Yalden during the Montrealer’s last visit to Alberta. “I was struck by how much history there was to the endeavour,” says Yalden, a partner with Osler, Hoskin & Harcourt LLP. “By how much investment, how much public planning for the development of infrastructure necessary for the private sector, how much forethought and long-term thinking was required to understand, back in the 1960s and 1970s, that the oil sands could become an extremely important part of the Alberta economy.” Looking at his province’s Plan Nord, he sees the need for the same type of long-term planning and vision.

And, perhaps, the need to learn from Alberta’s missteps along the way, because there have been a few.

“Quebec can take the lessons from the oil sands experiences,” says Donna Kennedy-Glans, a former vice-president with Nexen Inc. and now an advisor to the Canadian and international energy sectors. The public image of the oil sands – and the corporate social responsibility obligations of the companies involved in the industry – dominate her agenda.

Alberta’s lessons have been hard-earned and frequently painful. The most important one, Kennedy-Glans suggests, was handed down by the meltdown of 2008. And no, it wasn’t the obvious “we’re all held hostage to world commodity prices,” although the reminder that Alberta is part of the global economy and cannot control it certainly came home to roost. It was a subtler lesson: Beware the unintended consequences of a hot economy.

The 2008-09 recession, during which virtually every oil sands project was scaled back or put on hold, “made us understand the implications of the pace of investment on the resources and the decision-making around it,” says Kennedy-Glans. The hot-and-getting-hotter economy and high-and-rising oil prices of the early and mid-2000s led to breakneck development: an oil sands corporate gold rush of sorts.

The brakes put on by 2008 allowed everyone – companies, regulators, investors and, for better or worse, commentators – to “pause and look around,” as Kennedy-Glans puts it. “If you look at the tailing reclamation, water-use planning, all those issues – we started to see improvements in how we approached all those kinds of environmental issues after 2008.”

“The lesson there really is that you take those pauses to reflect, gather and collaborate,” she says. She points to the creation of the Canadian Oil Sands Innovation Alliance (COSIA) by a dozen oil sands producers, announced in early March 2012, as a fruit of this pause. In fact, the pause was arguably necessary for it to come into being. COSIA’s stated goal is to accelerate “the pace of improvement in environmental performance in Canada’s oil sands through collaborative action and innovation.”

For Kennedy-Glans, it’s a case in point that enterprises as ambitious as the oil sands – or the development of some 1.2 million square kilometres of Quebec’s northern territory – “need to emphasize the ability of individual companies to collaborate and to compete.”

And also that they might die if they can’t. Christopher Slubicki saw this first-hand. The oil and gas investment banker was pulled in to lead OPTI Canada Inc. in April 2009, when the junior oil sands producer was already, as Slubicki says bluntly, “a financial train wreck.” Slubicki’s participation in the OPTI story is all about salvaging whatever was left from what he characterizes as an overly-ambitious play for a junior.

OPTI was in a joint venture with Nexen to develop Long Lake, a project that will use steam assisted gravity drainage (SAGD) to extract oil. Nexen is now pursuing the project with China’s CNOOC Ltd, which purchased OPTI, then bankrupt, in November 2011. “We were not nearly sufficiently capitalized, and we underestimated the complexity of SAGD oil development,” says Slubicki. “We could have survived one of those – but not both,” Slubicki says. The economic erosion of the industry in 2008 was just one more thing: OPTI was too small, too ambitious – and too exposed.

Lesson to Quebec businesses planning to exploit the new frontier? Share the risk. There’s a reason the oil sands are peppered with partnerships and joint ventures – and, as the projects have grown, reasons galore that global players with deep pockets have squeezed out the small independent operators like OPTI.

For the rest of this article, please go to Alberta Venture Magazine website: http://albertaventure.com/2012/05/quebec-turns-to-alberta-for-guidance-in-developing-a-massive-tract-of-resource-rich-land-in-its-north/

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